Business Tax

Question 1

Trading Profits Process

Answer 1

1) Chargeable receipts - Deductible Expenditures - Capital Allowances

2) Capital Allowances:

WDA: 18%
AIA: 1,000,000 (new and second hand)
Full Expensing: 100% (new and company only)

Question 2

Reliefs Trading Losses (6)

Answer 2

1) Start up loss relief (first 4 years of business: can bring back up to 3 years)

2) Carry Across/One year carry back

3) Carry Back Terminal Trading Loss

4) Set off Against Capital Gains

5) Carry Forward Relief (indefinite but only against profits of same trade)

6) Carry forward on Incorporation (80% of consideration must be in shares, indefinite)

Question 3

VAT

Answer 3

If value of taxable supplies preceding 12 months exceeds 85,000

Pay every 3 months (quarterly) within 1 month 7 days

Question 4

Income Tax Steps

Answer 4

1) Calculate total income (exclude savings account shit)

2) Deduct any allowable reliefs (interest payments on qualifying loans: loan to buy share/contribute in partnership, loan to invest in close trading company, loan to PR to pay IHT)

3) Deduct any personal allowances

12,570 if over 100,00 deduct: 12,570 - (net income - 100,000) divided by 2

PSA: 1,000 basic, 500 higher and none additional

4) Calculate NSNDI, Savings and Dividends

If 500,000:

37,700 x 20% = 7,540
125,140- 37,700 = 87,440
87,700 x 40% = 34,976
500,000 - 125,140 = 374,860
374,860 x 45% = 168,687
7,540 + 34,976 + 168,687 = 211,203

Question 5

CGT Steps

Answer 5

1) Identify Disposal of Chargeable Asset

2) Calculate Gain

3) Reliefs

4) Aggregate Gains and Losses and Deduct Annual Exemptions (6,000 NO CARRY FORWARD)

5) Apply Correct Rate of Tax (10% if base rate (37,700), 20% if above additional 8% if not main residence)

Question 6

Reliefs CGT (8)

Answer 6

1) Rollover Relief (Replacement of Assets)

Applies to land, buildings, goodwill (must own 5% of voting shares)

1 year before or 3 years after

a) Subtract cost of replacement by gain of original asset

b) Subtract that figure by gain of sale of future asset

2) Rollover on incorporation (if shares received as consideration and business transferred with ALL assets excluding cash)

3) Rollover relief on gifts (gift or sale at undervalue if donee dies will escape

To qualify: assets used in trade, unlisted shares or listed shares if 5% control

4) Business Asset Disposal Relief

Business or any part as going concern, assets disposed of following cessation of business, interests in business owned for 2 years, company shares (5% employee or officer for 2 years)

5) Tangible Moving Property (wasting assets are exempt from CGT, antiques if less than 6,000)

6) Damages for personal injury

7) PRR (up to 0.5 hectare)

8) Spouse/Civil Partner

Question 7

Corporation Tax Steps

Answer 7

1) Calculate Income Profits

2) Calculate Chargeable Gains

3) Add both and Reliefs

4) Calculate Tax

Profits up to 50,000: 19%
Over 50,000 up to 250,000: 19% first 50k, 26.5% balance
More than 250,000: 25%

Question 8

When do you pay CGT?

Answer 8

On or before 31 January following end of tax year

If residential within 30 days of completion

Payment by installments: land, controlling shares, unquoted shares and gifts

Question 9

When do you pay income tax?

Answer 9

6 months from end of tax year

Question 10

When do you pay corporation tax?

Answer 10

9 months and 7 days at end of accounting period

Large and very large companies 4 installment (1.5 mil or 20 mil)

Question 11

Reliefs Corporation Tax (3)

Answer 11

1) Carry across/ carry back (1 year same trade)

2) Terminal Carry Back (3 years taking later years back)

3) Carry forward for trading loss (indefinite but max 5 million)

Question 12

Close Companies Loan

Answer 12

Pay HMRC equivalent to 33.75% of loan (deposit)